Accounting might sound dull, but knowledge in it is vital to managing and streamlining your company’s financial transactions.
Sound accounting skills allow you to report and record pieces of economic data crucial for business operations, allowing investors and managers to understand your company’s health while making better, more informed decisions in the process.
Remember, decision-making is a critical business management skill that will impede and drive your business’s financial performance.
In fact, according to McKinsey research, companies that utilize efficient and quick decision-making processes experience twice the financial returns compared to those that don’t.
So, to allow yourself to position your business for success in the short and long term, it is crucial to improve your accounting knowledge and literacy to overcome business challenges.
With that said, let’s look at a few reasons why an accounting degree helps make better business decisions.
An accounting degree will help you perform accurate financial analyses
Financial statements are a critical business resource for making more accurate, well-informed decisions. Besides knowing how to read them, you should also know how to analyze and interpret them and assess data.
For instance, learning about the numbers on your business’s balance sheet allows you to determine your business’s financial health while identifying whether it’s on the path to failure or success.
Furthermore, by assessing your business’s cash flow statement, you gain a valuable understanding of how your savings and investments are being used or generated.
By analyzing your business’s income statement, you gain insights into your company’s progress. As far as expected performance goes, if you know your way around balance sheets, you can make more accurate, well-informed decisions on budgeting and allocating money – even if you haven’t hired an accountant.
So, even if becoming an accountant wasn’t a long-term plan or a business requirement, it’ll be in your company’s best interest if you studied for an accounting degree.
An accounting degree will enable you to gauge the impact of initiatives and projects
To effectively manage your business, teams, and departments, you need to understand the importance of particular projects and initiatives.
Understanding and implementing the projected ROI of a specific project will allow you to create an excellent pitch and show potential investors the amount of profit your business will likely generate while identifying the resources it requires to accomplish it.
Furthermore, performing a cost-benefit analysis is another approach to using your accounting knowledge to make lucrative business decisions.
This method will provide you with a platform to conduct an evidence-based assessment of a particular project or initiative.
Not to mention, it’ll also enable you to compare projected costs to benefits. In the end, it’s an excellent way to break down complicated business decisions and decide which projects are worth pursuing and which aren’t.
An accounting degree will allow you to make better budgeting decisions
Budgeting is a critical accounting skill for all business leaders or decision-makers. At its core, your team’s budget is an essential component of your business that allows you to learn whether you have the necessary resources to reach your business goals.
In fact, when you break down your team’s tasks into measurable chunks during budgeting, you’ll be able to monitor your expenditures against predicted expenses easily.
This will allow you to adjust your strategy to ensure work is done on time and within an allocated budget.
Furthermore, understanding how to manage your business budget will let you communicate performance and progress to stakeholders, allowing them to make data-driven decisions for the company’s benefit.
An accounting degree will help you easily track your business’s performance
Undoubtedly, learning about your business’s present and past financial performance is vital to excellent decision-making.
Why? Because tracking key performance indicators or financial KPIs like return on equity, working capital, and gross profit margin will provide vital insights regarding your organization’s financial situation.
You’ll also have a clearer vision of your team’s and internal department’s contributions towards your company’s strategic goals.
For instance, metrics like profit and cash flow are vital for monitoring how your business grows and manages capital.
With good accounting skills, you can decide which resources and people are needed to reach business goals.
An accounting degree will allow you to ensure proper corporate governance
Reliable accounting know-how is vital for business leaders as it allows them to meet regulatory and legal obligations.
Since businesses must be transparent about their economic activities and report data to government agencies, business leaders and stakeholders can follow its tax laws, policies, and IRS audit requirements through proper financial knowledge.
In the end, the more financially literate you are, the easier it will be for your business to maintain tax compliance and other legal obligations.
Financial knowledge allows business owners to understand their economic activities and operations a whole lot better.
Through data gathered via various finance-related statements like income statements, balance sheets, and profit and loss statements, you and your company’s investors can make informed business decisions.
Understanding the ins and outs of finance allows your business to thrive and not just survive in today’s cutthroat marketplace.